Mumbai: Private sector companies seeking to tap the markets for capital have run up against the government’s massive divestment programme, aimed at raising as much as Rs30,000 crore. Many firms have been waiting for as long as three months to receive regulatory approval for their proposed share sales.

Market revival: A file photo of a man carrying share application forms in front of the Bombay Stock Exchange building in Mumbai. Indranil Mukherjee/AFP

In addition, at least three listed firms want to raise money through rights issues, or sale of shares to existing shareholders.

A significant portion of them have been waiting for at least three months to receive the go-ahead, as the government prepares to tap investors to raise money from the sale of shares in state-owned entities, said at least two investment bankers whose issues are also awaiting approval.

A doubling of key stock indices since March on the back of a surge in foreign investor inflows has spurred companies to tap the markets to fund expansion plans. The Indian economy, Asia’s third biggest, grew 7.9% in the three months ended September, the fastest in six quarters, as it recovered from the impact of a global recession.

The government’s divestment programme is aimed at raising funds for social sector programmes that include education and healthcare. State-owned electricity generator NTPC Ltd, Rural Electrification Corp. Ltd (REC) and NMDC Ltd are among the listed government firms planning to sell more shares in the next few weeks.

NTPC qualified as a so-called fast-track issue and did not require Sebi approval, but other issues did, according to an executive at an investment bank that is a subsidiary of a public sector lender.

“The department of disinvestment is in constant touch with Sebi on exemptions and approvals related to these issues. In the process, lot of small issues filed in and after September are not getting attention," explained the executive, who didn’t want to be named.

Between June and August, Sebi had cleared a number of issues within two-three months of applications being filed. But a majority of the offer documents filed in September are still awaiting approval. REC got regulatory clearance within one month of filing a draft offer document on 1 December.

A senior Sebi official denied there was any connection between the government’s public issues and the applications of private companies.

“How can the government’s public issues delay others’ applications? I do not need to give any explanation regarding any public issue application, as we keep updating the public regarding this on our website," said this official, who also didn’t want to be named.

According to the Sebi website, issues can be cleared as early as 30 days from the date of filing the offer document, but there is no outer limit for such approvals.

Prasaad Akolkar, managing director and chief executive officer of Allbank Finance Ltd, said the process is faster for government companies and some “high-grade" firms.

“While well-known groups may get through faster, for the absolutely new companies, Sebi takes two-three months for the due diligence to be completed," he said.

Indiabulls Power Ltd, which filed draft offer document in July, got approval in September. Similarly, Den Networks, DB Corp. Ltd, JSW Energy Ltd and Cox and Kings Ltd, which had filed their papers in August, received approval by November.

But many private sector firms that filed after September have not been as lucky. Out of the 24 IPO documents filed in September, only two— Emmbi Polyarns Ltd and Aqua Logistics Ltd—have got Sebi approval.

Of the 45 offer documents filed since October, only three have been cleared, one of which is REC.

A number of realty firms filed their papers with Sebi in late September, including Sahara Prime City, Emaar MGF Ltd and Lodha Developers.

“They are going slow. In real estate, it seems to be a conscious decision to go slow," said Arun Kejriwal, managing director of Kejriwal Research and Investment Services Ltd, a Mumbai-based firm that tracks IPOs. “But in general, it is difficult to say it is intentional or incidental."

Officials at companies that are awaiting regulatory clearance said they cannot do much except to answer any clarification Sebi might seek. “The application is with Sebi. We can’t say when will we get the approval," said an official at Sahara Prime City, who didn’t want to be named.

But companies are getting nervous about missing out on a window for raising funds at a time when investor sentiment is positive. They are fretting that the market may soon turn volatile, with interest rates likely to rise after the Reserve Bank of India’s next policy meeting, said an investment banker with a private bank on condition of anonymity.

Gains on listing of at least four recent IPOs have raised hopes of higher retail participation in similar offers later this year. Listing gains are critical for a class of investors who subscribe to IPOs and exit at the time of listing after booking a profit. A sizeable chunk of IPO financing revolves around listing gains as high networth individuals borrow money in the hope that such gains will beat the cost of their funds.

Newspaper publisher DB Corp. gained 25% on its listing on Wednesday, Godrej Properties Ltd rose 9% on listing on Tuesday. JSW Energy closed marginally up on listing day, but gained over 10% on Tuesday. Cox & Kings delivered a 29.11% return on listing day in December.

“This (listing gains) will boost the confidence of investors, which had taken a beating over the past year or so," said Atul Mehra, co-CEO of JM Financial Consultants Pvt. Ltd, a local investment bank. If the trend continues, he said, “investors who are now flush with funds will come back to the capital markets with a vengeance".